For anyone who also has this problem:
The best solution I can find is to right click a clip in the browser, and select item properties > format. Then right click on the current pixel aspect setting. In my case it is reading HD(1280 x 1080) – change it to square and press OK.
This will allow the clip to be displayed properly in the timeline, and will no longer scale the aspect ratio under the motion tab when the clip is added to the timeline.
best,
Jason